Practice Management

The president and vice president saved a combined $110,182 in taxes last year under the income tax cuts passed by their administration, according to an analysis of the 2004 tax returns released by the White House.

Tax preparation and related fees from H&R Block Inc.'s U.S. retail operations increased 6.4 percent to $1.9 billion through March 31, 2005, the tax prep giant reported.

Washington - The call for the nation's tax preparers to be more closely monitored for proficiency has been echoed by the National Taxpayer Advocate, as well as by a number of tax professional membership associations.

Within the new reality of date-sensitive tax legislation, practitioners must not only be attentive to sunset provisions for the many tax benefits now granted by Congress - they also need to keep a calendar marked for benefits that phase in or start on a time-delayed basis. In the latter category, one of the more extreme examples is about to hit potentially millions of businesses and tax-exempt employers.

Apparently, there's a good reason the regular 1040 is referred to as the "long" form -- it takes the average taxpayer more than a full day to prepare the form with three common schedules, according to an annual study of tax complexity.

The Internal Revenue Service needs to remedy serious weaknesses over taxpayer and Bank Secrecy Act data that leave its systems vulnerable, according to a report released by the Government Accountability Office.

With the April 15 tax filing deadline looming, the Internal Revenue Service says that e-filing, direct deposit and e-payment programs continue to move at record paces so far this year.

The Internal Revenue Service announced that as of April 1, some 52 million returns had been filed electronically, 7 percent above last year's e-filing pace. Overall, 65 percent of all returns were e-filed -- up from 60 percent for the same period last year. The service also reported that roughly 4 million returns have been filed via the Free File program -- up 44 percent from the year-ago figures. "As we get deeper into the tax filing season, the percent difference between how many people are using e-file and how many used it last year keeps going up," said IRS Commissioner Mark W. Everson. "This shapes up as a really strong year. Taxpayers who haven't filed yet should check into e-file and Free File." The IRS also said that 42 million refunds have been paid through direct deposit, up 5.7 percent for the same time last year.

Senators from both sides of the aisle and the Treasury Inspector General for Tax Administration questioned the plan by the Internal Revenue Service to cut back its walk-in and telephone Taxpayer Assistance Centers during a hearing on the 2006 IRS budget. IRS Commissioner Mark Everson discussed the agency's plan to close as many as 105 TACs and cut back its toll-free telephone service by 15 hours a week at the Senate Appropriations Subcommittee hearing. TACs are located nationwide and allow taxpayers to have face-to-face meetings with IRS employees who can assist taxpayers with tax law, tax return preparation and account inquiry resolution. "The IRS needs to balance customer service with its compliance and enforcement efforts," said Sen. Christopher Bond, R-Mo., chairman of the Transportation, Treasury and Housing and Urban Development Subcommittee. "I believe that most people who fail to comply with the tax code do so unintentionally because of its difficulty and complexity. Accurate and timely guidance from the service is imperative to ensuring taxpayer compliance." Colleen M. Kelley, president of the National Treasury Employees Union, warned that closing Taxpayer Assistance Centers will result in reduced taxpayer education and compliance at a time when the gap between taxes owed and amounts paid has increased to upwards of $298 billion.

The government is upping its enforcement measures in the wake of its success in catching tax cheats, penalizing promoters, barring unscrupulous preparers and shutting down abusive tax shelters, according to officials. At a joint Internal Revenue Service-Justice Department briefing, agency executives noted that last year, IRS Criminal Investigation referred more than 3,000 cases to the Justice Department for possible criminal prosecution, nearly a 20 percent increase over the previous year. During fiscal year 2004, the conviction rate on cases investigated by the IRS and referred to Justice was 95.4 percent. "If you're thinking about cheating on your taxes, think twice," said IRS Commissioner Mark W. Everson. "The IRS is ramping up its enforcement efforts, particularly for high-income individuals and corporations. Where we need to, we turn to the Justice Department to take people to court." The Justice Department's Tax Division's criminal enforcement priorities include prosecuting schemes that involve using trusts or other entities to conceal control over income and assets; shifting assets and income to hidden offshore accounts; claiming fictitious deductions; using frivolous justifications for not filing truthful tax returns; failing to withhold, report and pay payroll and income taxes; failing to report income; and failing to file tax returns.